Coming off their best year in a decade, Housing Starts surprisingly rose 9.7% in January, as home building heated up to a 1.326 million annual rate. The future looks good too, with Building Permits up to a 1.396 million annual rate.
The National Association of Home Builders (NAHB) found builder confidence in future sales expectations is now at a post-recession high. The NAHB Chair put this to "the pro-business political climate that will strengthen the housing market."
Finally, a recent study reports the median age at which consumers buy their first home is 29.1 years, yet some three quarters of millennials are not currently homeowners., what an opportunity!
Review of Last Week
After falling sharply the prior two weeks, the stock market rebounded last week, recovering about half its losses, and the three major indexes are again, ahead for the year. It seems the big dip on Wall Street was just a correction.
That's not to say we won't have greater volatility this year than last, when stocks gained more than 20%, while never posting even a 3% loss. This year, investors worry about inflation driving the Fed to more rate hikes, and last week saw a hotter than expected Consumer Price Index (CPI).
The economy doesn't seem in danger of overheating. Its strength is growing, with corporate earnings up more than 15% and revenues up nearly 8% the past year, plus historically low unemployment. It's no surprise Michigan Consumer Sentiment hit 99.9, its second highest print in 14 years.
The week ended with the Dow UP 4.3%, to 25219; the S&P 500 also UP 4.3%, to 2732; and the Nasdaq UP 5.3%, to 7239.
In bonds, prices generally softened, as investors shifted money back into equities. The 30YR FNMA 4.0% bond we watch dipped .08, to $102.47. Freddie Mac's latest Primary Mortgage Market Survey reported national average 30-year fixed mortgage rates continue to climb, reaching the level they posted in April 2014.
This Week's Forecast
Forecasters expect to see continued growth in Existing Home Sales in January, hitting an annual rate well above 5.5 million. Not much else gets reported during this four-day week, but we'll keep an eye on Unemployment Claims, predicted to remain historically low.
The U.S. stock and bond markets were closed yesterday in observance of Presidents' Day.
The Week's Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of February 19th through February 23rd:
Feb 21 10:00 Existing Home Sales
Feb 22 08:30 Initial Unemployment Claims
Feb 22 08:30 Continuing Unemployment Claims
Feb 22 10:00 Leading Economic Index (LEI)
Feb 22 11:00 Crude Inventories
Federal Reserve Watch
Speculative Forecasting Federal Reserve policy changes in coming months:
The futures market sees an even higher probability the Fed will hike rates a month from now, leave things alone in May, and bump up again in June.
Note: In the lower chart, an 80% probability of change is an 80% certainty the rate will move higher.
Current Fed Funds Rate: 1.25%-1.50%
After FOMC meeting on:
Mar 21 1.50%-1.75%
May 2 1.50%-1.75%
Jun 13 1.75%-2.00%
Probability of change from current policy:
After FOMC meeting on:
Mar 21 80%
May 2 25%
Jun 13 66%
Where are interest rates headed?
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